Rating af investeringsforeninger og deres performance vedholdenhed

Jacob Martin Legène

Student thesis: Master thesis

Abstract

Performance persistence has long been a subject of interest for academics and investors alike. Is it possible to beat the marked? This article examines if performance persistence is an identifiable phenomenon among inter-national equity mutual funds from January 2000 to December 2011. Data comprise of NAV adjusted returns for a randomly selected sample of mutual funds. 248 individual mutual funds comprise the data sample at the end of 2011. This article acknowledges the complexity involved when studying performance persistence, which is mitigated by combining several performance measurements with selected statistical methods to ensure robust conclusions. The Sharpe ratio, modified Sharpe ratio, Jensens alpha, Fama-French alpha and Carhart alpha are used to evaluate mutual fund performance. Randomly distributed ranking of mutual funds are rejected through Spearman rank rho corre-lation test. Cross-sectional regression of past performance gives an indication of performance persistence, though not categorically significant. Both Spearman rank correlation test and cross sectional regressions are performed on 3 and 6 year horizons. To analyze 1 year performance persistence synthetic portfolios are constructed. The article groups’ mutual funds into 4 synthetic portfolios based on their 1 year lagged Sharpe ratio and momentum. Both grouping techniques clearly show that the top synthetic portfolios generate returns greater than the market portfolio. Times series regressions are performed using CAPM, Fama-French’s 3-factor model and Carhart’s 4-factor model. Although the results are only significant when analyzed via the CAPM universe, the results indicate performance per-sistence. Box-Jenkins analysis shows that autocorrelation are detectable in the excess return of the top synthetic portfolios on lagged 6 and 12 months intervals. The top Sharpe portfolio generates an excess return of nearly 70 % relative to the marked portfolio. The top momentum portfolio generates almost 50 % relative to the marked portfolio. This article indicates that performance persistence is detectable for mutual funds

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2012
Number of pages115